Confused about when you can get your money back in a Houston home purchase? Many buyers mix up earnest money and the option fee, and that confusion can cost you real dollars. If you understand what each payment does, you can negotiate with confidence and protect your funds. In this guide, you’ll learn the purpose, timing, typical amounts, and what happens in common scenarios across Houston and Harris County. Let’s dive in.
Earnest money vs option fee
Earnest money is a deposit that shows you intend to follow through with the contract. It is held in escrow by the title company named in your contract and is usually credited to your purchase price or closing costs at closing. Whether it is refundable depends on the contract. The standard Texas process relies on the TREC residential contract forms, which spell out amounts, deadlines, and contingencies you can use to protect your deposit. You can review those forms and consumer guidance on the Texas Real Estate Commission site.
Option fee is a separate payment you make to the seller for a short, negotiated option period. During that window, you can terminate for any reason if you deliver written notice on time. The option fee is generally nonrefundable because it compensates the seller for taking the home off the market. If both parties agree in the contract, it can be credited at closing, but that is a negotiable term and not automatic.
How they work in Houston contracts
Here is the typical flow for Houston and Harris County using TREC forms:
- You sign a contract that names the escrow agent or title company and sets the amounts and deadlines for earnest money and the option fee.
- You deliver the earnest money to the named escrow agent by the deadline in the contract. The title company issues a receipt once funds are deposited.
- If you negotiated an option period, you pay the option fee by the contract deadline to the recipient named in the contract. Get a receipt.
- The option period runs for the number of days in the contract. If you terminate within that period and follow the notice rules, you usually get your earnest money back. The seller keeps the option fee.
- If you continue past the option period and later default without a contract right, your earnest money may be at risk under the contract’s remedies.
Deadlines and notices matter. The contract sets exact dates and how notice must be delivered. If you miss a deadline or send notice the wrong way, you may lose protections. When in doubt, review the instructions on the TREC form and confirm with your agent and title company.
Typical amounts in Houston
While every deal is negotiable, these ranges are common in Houston-area practice:
- Option fee: About $100 to $500 in many transactions. In hot multiple-offer situations or for longer option periods, it can be $1,000 or more. In rare cases it can be as low as $10 to $50. The number of days and market competition will influence the amount.
- Earnest money: Often around 1 percent of the purchase price. For example, about $3,000 on a $300,000 home. In slower markets, some buyers offer a flat amount. In competitive markets, sellers may expect a larger deposit.
These patterns line up with statewide practice and what you see across Houston, from Pearland and Sienna to Cypress and inner-loop neighborhoods. For broader market context, the Houston Association of REALTORS publishes local reports and resources.
What happens in real scenarios
You terminate during the option period
You deliver written notice to the seller before the option period expires. The seller keeps the option fee. Your earnest money is typically returned per the contract and escrow procedures, since you used your option right correctly. Make sure you have proof of delivery for your notice.
You terminate after the option period without a contingency
If you end the contract after the option period and you do not have a valid contract right to terminate, the seller may be entitled to keep your earnest money as liquidated damages if the contract allows that remedy. The escrow agent may hold funds until both parties agree or a court orders a release. The option fee stays with the seller and does not change the earnest money remedy.
The seller breaches the contract
If the seller fails to perform, the contract remedies will control. In many cases, your earnest money may be returned if the seller materially breaches and you terminate under the contract. Disputes are handled per the contract’s dispute language, and the title company will require written instructions from both parties or a court order to release funds.
You close on the home
Your earnest money is credited to your price or closing costs at closing. The option fee is credited only if your contract says so. If it is silent, the fee generally remains with the seller and is not credited.
Timeline and checklist
Use this quick checklist to stay on track:
- Confirm the exact amounts, recipients, and deadlines for both payments in the signed contract.
- Deliver earnest money to the named escrow or title company and request a written receipt.
- Deliver the option fee by the deadline to the named recipient and keep a receipt.
- Schedule inspections early to finish within the option period.
- If you plan to terminate during the option period, send written notice per the contract method and keep proof of delivery.
Quick delivery tips:
- Verify wiring instructions directly with the title company at a known phone number to avoid fraud. The FBI tracks scams in this area, so review its real estate wire fraud guidance.
- If you want a refresher on escrow basics, this consumer primer explains how deposits work: What is Earnest Money?
- For form questions, check the current TREC materials and instructions at the TREC website.
Buyer tips
- Decide if you need an option period for inspections. It gives you flexibility for a modest cost.
- In a competitive offer environment, consider shortening the option period or increasing earnest money rather than waiving inspection rights.
- Keep copies of checks, wire receipts, and written confirmations from the title company.
- Know whether your lender needs documentation for your earnest money source and deposit timing.
Seller tips
- Decide if you will accept an option period and for how long. You can negotiate a higher option fee or a shorter window for more certainty.
- Be clear in the contract about whether the option fee will be credited at closing.
- Understand that keeping earnest money may be allowed if the buyer breaches, but disputes often require written agreement or a court order for the title company to release funds.
- Coordinate with your agent on how and where you want the option fee delivered and how receipts will be tracked.
If you want more background on Texas contracts and consumer guidance, explore resources from Texas REALTORS and the Texas Real Estate Commission.
Ready to structure a winning offer or protect your interests as a seller in Houston and Harris County? Let’s talk about timelines, amounts, and strategies that fit your goals. Schedule a Consultation with Unknown Company to get clear, local guidance tailored to your next move.
FAQs
What is the difference between earnest money and the option fee in Texas?
- Earnest money is a refundable deposit held in escrow and applied at closing if you proceed, while the option fee is a nonrefundable payment to the seller for a short period when you can cancel for any reason.
Who holds earnest money in a Houston home purchase?
- The escrow or title company named in the TREC contract holds earnest money and issues a receipt once funds are deposited.
Is the option fee refundable if I cancel during the option period?
- No. The seller keeps the option fee because it compensates them for taking the property off the market during your inspection window.
Can the option fee be credited to me at closing in Texas?
- Yes, but only if the contract specifies that the option fee will be credited at closing. It is a negotiable term.
What happens if I miss the deadline to deliver the option fee?
- You may lose the option period protection if the fee is not delivered on time per the contract, which can remove your right to cancel for any reason during that window.
Can a seller keep both the option fee and the earnest money?
- It can happen in certain situations, such as a buyer breach after the option period expires, but a normal termination during a valid option period usually means the seller keeps only the option fee and the buyer’s earnest money is returned.
Should I wire my earnest money to the title company?
- Many title companies accept wires, but you must verify instructions by calling the title company at a known number and follow the FBI’s wire fraud precautions before sending funds.
